CULTURE: THE “X-FACTOR” IN YOUR ABILITY TO GROW YOUR BUSINESS

CULTURE: THE “X-FACTOR” IN YOUR ABILITY TO GROW YOUR BUSINESS

Management By Coaching

Creating a solid corporate culture can work for—and not against—your agency and its performance

Frustrated with the constraints of corporate life and anxious to build a business of their own, Rob and Trey purchased a small agency in the southwest and said good-bye to their promising careers with a major property/casualty insurer. In their first five years of business, the agency, which we’ll call West Lake Insurance for the purposes of this column, exceeded even their ambitious growth targets.

Trey was a people person with a gift for selling. Rob loved the operations side. Together they built an organization that functioned like a well-oiled machine, powered by a loyal close-knit staff that shared Rob’s and Trey’s work ethic and belief in the agency’s future.

But in 2015, the business began to struggle. The current team couldn’t handle the growth anymore. Client service and new business efforts were suffering.

West Lake moved quickly to fill the void and staff up for future growth, but the labor pool of trained insurance people was limited. New hires ended up being a mix of seasoned professionals from competing firms and “promising” recent college graduates.

It didn’t take long for conflict to emerge. The majority of the new hires didn’t share the agency’s values or work ethic. The “experienced” hires continually challenged West Lake’s hyper-sense of urgency and willingness to be available to key clients 24/7. The recent college graduates floundered in an environment where people were self-starters and the pace of business allowed little time for feedback and collaboration.

Tensions in the office were high. Long-time West Lake staffers resented picking up the slack for the newer hires and the time they were forced to spend teaching the recent graduates the business. Multiple factions formed and battle lines were drawn. For the first time since its founding, West Lake had an employee turnover problem. The internal strife was taking a toll on sales and client service.

From the beginning, West Lake had a strong company culture. The agency valued hard work, intelligence, independence, self-motivation, resilience, and going above and beyond for clients. It wasn’t planned or communicated in any formal way; it was just how Rob and Trey and the employees they attracted behaved.

This culture served West Lake well in its first five years. But as the agency was forced to expand its workforce in a community with a limited labor market, the culture needed to evolve if the business was going to continue to grow.

What is business culture and why does it matter?

Whether by default or choice, every business has a culture. It is the collective beliefs, values and attitudes, and implicit rules within an organization that shape actions, minute by minute, day by day. Put simply, it’s “the way we do things around here.” Typically, the culture reflects the beliefs and behaviors of the founder(s).

Often, culture is mistakenly viewed as a soft or fuzzy concept. The truth is that culture drives the destiny of an organization. It influences management, strategic direction, business decisions, and all functions from sales to accounting. According to Harvard Business School Professor Emeritus James L. Heskett, its impact on profit can be measured and quantified. Research shows that in organizations with large numbers of employee-facing staff, as much as half the difference in operating profit in companies in the same business can be attributed to effective cultures.

In his book The Culture Cycle: How to Shape the Unseen Force that Transforms Performance, Heskett explains, “Engaged managers and employees are much more likely to remain in an organization, leading directly to fewer hires from outside the organization. This, in turn, results in lower wage costs for talent; lower recruiting, hiring, and training costs, and higher productivity (fewer lost sales and higher sales per employee). Higher employee continuity leads to better customer relationships that contribute to greater customer loyalty, lower marketing costs and enhanced sales.”

Is your culture working for or against you?

While there are common components in effective cultures such as employees who buy into and live the mission and values of the company, there is no single “right culture.” Every business is unique. What’s critical is that the culture supports the growth of your business, your employees, your clients, and the environment in which you operate.

West Lake illustrates this point. What once was an effective culture rapidly turned into a liability. The culture of the original team simply wasn’t scalable based on the territory in which they wanted to operate and the speed at which they wanted to grow. West Lake needed a new culture—one in which a more diverse group of employees could feel at home and thrive.

Knowing when it’s time for a change can be challenging. When we work in an environment every day, it’s easy to miss the subtle signs that things are getting worse until things are really bad. It is important to have measures in place that remove subjectivity and provide early warning signals that things are beginning to become problematic.

Financial numbers aren’t enough. By the time financial results are trending downward, it is too late. Financial numbers measure the past and don’t provide the predictive information you need to stay ahead of an issue. The numbers that best predict your culture is no longer working for your business are: employee retention; referrals; productivity; and customer retention and satisfaction. When these numbers start deteriorating, it’s time to reexamine organization values and behaviors, hiring practices, and other elements of your culture.

Where to begin if you want to change or strengthen your culture

Recognize that you can’t control everything about your culture, but you can intentionally take it into your own hands. A tool that can help is called a Culture Map. Developed by Dave Gray, author of The Connected Company, the Culture Map focuses on three key elements of organizational culture.

Outcomes. These are the things you want and don’t want your culture to achieve. Start by describing the outcomes you don’t want to see. To get the ball rolling, you may want to pick a theme such as “poor customer service” or “lack of accountability.” Another way to stimulate the discussion is to focus on an incident that’s taken place internally. The goal is to work together as a team to build a list of the outcomes you don’t want to see. The more depth and specificity of your outcomes the better.

Next, identify the outcomes in your desired culture. Your desired outcomes may often be the opposite of your undesired outcomes, but it also is helpful to think beyond that. For example, an internal stance to become a more family-friendly workplace may not directly answer a negative element in your existing culture, but it may increase the appeal of working for your company and boost employees’ loyalty to the business.

Behaviors. Then, look at behaviors. These are the actions people perform every day that result in the outcomes you’ve just listed. What are the specific things you want people doing and not doing? When you identify these desirable and undesirable behaviors, it’s helpful to consider three categories: individual, team, and leadership.

Desirable: Shows passion for work, is continually learning, takes ownership, and most important, looks forward to coming into work

Team behavior

Undesirable: Needs to be in control, participates in in-fighting and blaming, is self-serving, and sabotages projects

Desirable: Collaborates, helps others, does their share, is open and honest, and has fun

Leadership behavior

Undesirable: Cares about personal power and success, and only focuses on quarterly numbers

Desirable: Listens to teams, helps people grow, is accessible and open

Enablers and blockers. These are the formal or informal policies, rituals, actions, and rules that enable or block your desired culture. This is where you really have the ability to influence the outcomes and behaviors you’ve identified. Make sure policies, procedures, and incentives support the culture you want. For example, if you want employees to take more initiative, people can’t be chastised for making a mistake. Mistakes will happen and they need to be viewed as learning experiences. If customer satisfaction is important, measure it and make it part of the employee’s goal and compensation.

Understanding and mapping these three components is a critical first step in helping you understand, communicate, and facilitate the culture you want to build.

Ultimately, the human element comes into play. No company can build an effective culture without people who either share the organization’s core values or are willing and able to embrace those values. Values are of little importance unless they are lived every day and hardwired into how the business operates. The job of building the culture begins at the top with leaders who consistently set the behavioral example that they want others to follow.

Building an effective culture is often about changing behavior. Changing behavior is never easy. It takes perseverance and patience. But when you consider the powerful impact it can have on your business, it’s well worth the investment. Culture is the glue that binds an organization together and is the hardest thing for competitors to copy. As a result, it can be a lasting source of competitive advantage.

The author

Kimberly Paterson is a business and Certified Energy Leadership Coach. She is president of CIM (www.cim-co.com), where she works with insurance organizations to build the vision, strategy, customer insight and leadership skills to energize people and achieve outstanding results. She can be reached at kpaterson@cim-co.com